Question

A company's Inventory balance at 12/31/16 was $188,000 and $200,000 at 12/31/15. Its Accounts Payable balance at 12/31/16 was $84,000 and $80,000 at 12/31/15, and its cost of goods sold for 2016 was $720,000. The company's total amount of cash payments for merchandise in 2016 equals: a. $720,000. b. $728,000. c. $712,000. d. $704,000. e. $736,000.

Answer 1

Answer:

d. $704,000

Explanation:

The computation of the cash payment for merchandise is shown below:

= Opening balance of accounts payable + purchase made - closing balance of accounts payable

where,

Purchase = Cost of goods sold + closing balance of inventory - opening balance of inventory

= $720,000 + $188,000 - $200,000

= $708,000

The other items values would remain the same

Now put these values to the above formula  

So, the value would equal to

= $80,000 + $708,000 - $84,000

= $704,000